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CLU- Life Insurance Intro Practice Exam questions and Answers
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CLU- Life Insurance Intro Practice Exam questions and Answers Life insurance can meet which of the following client needs? (LO 1.1) Question 1 options: A)Pay debts. B) Provide income for surviving family members. C) Provide income for surviving family members. D) All of the above. D) All of ...

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  • December 8, 2024
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  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • clu life insurance intro practice exam questions
  • life insurance can meet which of the following cli
  • a life insurance contract is primarily governed by

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CLU- Life Insurance Intro Practice Exam
questions and Answers
Life insurance can meet which of the following client needs? (LO 1.1)
Question 1 options:
A)Pay debts.
B) Provide income for surviving family members.
C) Provide income for surviving family members.
D) All of the above. - answer D) All of the above

A life insurance contract is primarily governed by which of the following? (LO 1.2)
A) Federal law
B) State law
C) The law of large numbers
D) British common law - answer B) State law

What are the three primary factors in premium calculations? (LO 1.3)
A) Agent commissions, mortality, and expense ratios
B) Agent commissions, interest rates, and lapse rates
C) Interest rates, expenses, and mortality
D) Interest rates, morbidity, and company dividends - answer C) Interest rates,
expenses, and mortality

Insurance companies base their mortality assumptions on (LO 1.3)
A) the experience of large groups of people.
B) published mortality results of the five largest European life insurance companies.
C) the original 1900 Commissioners Standard Ordinary mortality tables.
D) assumptions made by actuaries employed by NAIC. - answer A) The experience
of large groups of people

Cash value increases in a life insurance policy are not usually taxable income as long
as (LO 1.2)
A) the policy remains in force.
B) the increase comes from premium payments, not investment returns.
C) the increase comes from investment returns only.
D) the policyholder does not make any changes to the death benefit - answer A) the
policy remains in force.

The "multiples-of-salary" method of estimating the amount of a family's insurance needs
is (LO 1.5)
A) a rule of thumb method that determines insurance need by looking the surviving
spouse's earnings potential.
B) a method that was repealed by overturning the DOMA legislation

,C) a method combining a simple rule of thumb method with elements of income
replacement and needs analysis.
D) a method that can be used only by individuals who are properly licensed with FINRA.
- answer C) a method combining a simple rule of thumb method with elements of
income replacement and needs analysis.

The human life value concept basically holds that the measure of the economic value of
a life is (LO 1.6)
Question 7 options:
A)the highest single year earnings of the prior five years.
B)the present value of the future earnings potential.
C)the surviving spouse's total earnings to retirement.
D)the taxable wage base adjusted for inflation. - answer B)the present value of the
future earnings potential.

The income replacement approach to determining a family's insurance needs is based
primarily on (LO 1.6)
A)the annual adjustment to the Social Security taxable wage base.
B)ERISA regulations issued by the Department of Labor.
C)the current balance in the deceased wage earners qualified plan account.
D)the human life value concept. - answer D)the human life value concept.

A conceptually sound approach to valuing key employees should (LO 1.7)
A)account for increased productivity of other employees.
B)discount for trends in the life cycle of the business.
C)recognize that most, if not all, of the value of key employee contributions will be
recovered over time through change or adapting.
D)assume that a replacement key employee can be hired at a lower pay scale. - answer
C)recognize that most, if not all, of the value of key employee contributions will be
recovered over time through change or adapting.

Question 10 (1 point)
Under the income replacement approach, insurance value is always _______ the
human life value. (LO 1.6)
Question 10 options:
A)less than
B)one half of
C)increased by
D)related to - answer A)less than

Disadvantages of term insurance include all of the following EXCEPT: (LO 2.1)
A)There are no tax-free automatic savings.
B)Premiums increase with age.
C)There are no loan values.

, D)Proceeds are not part of a probated estate unless the estate is a named beneficiary. -
answer D)Proceeds are not part of a probated estate unless the estate is a named
beneficiary.

When comparing term policies, which of the following factors should be considered?
(LO 2.1)
I. To which age may coverage be converted to ordinary whole life?
II. What is the schedule of future renewal premiums?
A)I only
B)II only
C)Both I and II
D)Neither I nor II - answer C)Both I and II

All of the following are characteristics of a level-premium non-participating whole life
insurance policy EXCEPT: (LO 2.3)
A)In the early years of the policy, the amount of protection is lower relative to premium
spent than term insurance.
B)Federal income tax is deferred on cash value accumulations.
C)There is a periodic adjustment of premium and death benefit.
D)There is a schedule of guaranteed cash values. - answer C)There is a periodic
adjustment of premium and death benefit.

Which of the following types of life insurance requires the greatest amount of annual
premium for the same amount of death benefit? (LO 2.5)
A) First-to-die whole life insurance
B) Level-premium participating whole life insurance
C)Limited-pay whole life insurance
D)Single-premium whole life insurance - answer D)Single-premium whole life
insurance

A single-premium life insurance policy issued before June 21, 1988, is "grandfathered";
that is, it is not subject to the MEC (Modified Endowment Contract) tax rules. However,
it can lose this tax status if there is (LO 2.7)
A)a death benefit increase inherent in the policy design due to crediting of interest or
other earnings.
B)a death benefit increase needed to keep the relationship between the death benefit
and cash values required to satisfy the tax code definition of life insurance.
C)a cost-of-living increase based on a broad based index such as the Consumer Price
Index.
D)an exchange of the policy for another policy. - answer D)an exchange of the policy
for another policy.

All of the following are appropriate uses of single premium whole life insurance
EXCEPT (LO 2.6)
A)when maximum tax-deferred cash buildup in conjunction with life insurance is
desired.

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